Twenty years of consumer price changes in B.C....Some prices up, some down, some up a lot

August 19, 2019
Ken Peacock

Consumer price inflation in B.C. averaged 1.6% over the past two decades. But as consumers know, the prices of some goods and services have risen substantially, while other items have had stable prices or experienced some decline in prices over time. Generally, consumers have faced larger price increases for services and non-durable goods. In contrast, the cost of the basket of durable goods in the CPI is lower today than it was in 1998. The cost of a basket of semi-durable goods has edged up only modestly.

Durable goods are manufactured items which can be used repeatedly or continuously for more than a year, such as cars, furniture, video equipment, appliances and so on. Most of these items are imported into the province. Growing international trade, global supply chains, the rise of China as a manufacturing powerhouse, and productivity gains in the manufacturing sector across North America have all contributed to lower durable goods prices. Note, too, that even when durable goods are produced locally, the fact that they face stiff import competition often puts downward pressure on prices.

Figure 1

20 Years of Price Changes in B.C.

Source: Statistics Canada, Consumer Price Index, table number 18-10-0004-01.

Semi-durable goods are things that can last less than 12 months or more than 12 months, depending on their purpose and use. Examples include clothing, footwear and household textiles. Inflation in this broad category has been muted, with the sub-index rising just 10% over the past twenty years.

Items that are generally used up within a year are classified as non-durable goods. Food products, paper products and gasoline are examples. The reason the non-durable goods sub-index has seen the largest price rise among the different sub-indices shown in the above figure is largely because of food and gasoline, which have witnesses some of the biggest price jumps across the entire array of consumer prices. If these are stripped out of the sub-index, prices of the remaining basket of non-durable goods are essentially flat over the past two decades.

The next figure is a more detailed product breakdown of price trends in consumer goods and services that comprise the consumer price index. Unsurprisingly, prices for home entertainment products (televisions, video game consoles and other consumer electronics) have fallen by 50%. The cost of home appliances is also lower. Clothing costs for a representative household have declined slightly while footwear prices are up a bit.

Figure 2

B.C. Consumer Price Indexes, Selected Goods & Services, 1998=100

Source: Statistics Canada, Consumer Price Index, table number 18-10-0004-01.

Something that many consumers may find surprising is that the price of a vehicle today is unchanged from 1998 (in the wake of the 2008-09 financial crisis, vehicle prices fell 10%, and then gradually returned to 1998 prices). Here, readers should note that in tabulating the CPI, Statistics Canada attempts to identify pure price effects and avoid capturing price changes that are due to quality improvements. For items like cereal, flour or gasoline, this is straightforward because there is little to no change in quality over time. But with a vehicle, quality improvements are significant and continuous. The CPI tries to adjust for such quality improvements. So, what the CPI is really saying is that after taking quality improvements into account, the price of a vehicle today is the same as in 1998.

Towards the other end of the inflation scale, prices for food from stores and also from restaurants have risen steadily and substantially outpaced the overall rate of inflation. Consumers in B.C. are also paying significantly more for home insurance.

Among the items and services shown in the above figure, it is worth pointing out that property taxes have seen the biggest rise. The property tax index measures changes in the taxes levied on a constant sample of dwellings in selected municipalities. This sample of property taxes is used to estimate the average increase in property taxes by city, with weighted averages then calculated to estimate the increase at the provincial level. Municipalities can step to the front of the line as the source of the biggest percentage increases in living costs for B.C. residents among the categories of goods and services included in the above chart.

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